Tag Archives: ExxonValdez

Reputation crises and political impact–Goldman and offshore drilling

There is almost always a link between major reputation crises and politics as I’ve written about in Now Is Too Late. It certainly was true in the first really major disaster I was involved in, the Olympic Pipeline explosion, and it certainly is of two major crises events going on right now: Goldman Sachs and the Deepwater Horizon drilling rig event. Goldman’s problems will influence significantly the very important national debate on financial oversight. The Deepwater Horizon event will influence the debate on energy independence and expansion of offshore drilling.

Which means, of course, that the crisis managers involved in working these two humongous issues right now, will have a very significant impact on the long term decisions that elected officials will make in these two arenas. We talk about the importance of Supreme Court nominations because they will affect big decisions for years. Have we ever thought about executive and communication leadership in that way, thinking about how well they do their jobs may influence public policy on issues as important as what are the constraints government should put on greed, and how aggressively should we pursue energy independence?

A few thoughts on Goldman Sachs. Would they be aggressively pursued by the SEC if they had not had the gall to be so stinking successful in an economy and political environment that suddenly sees huge profits and executive payouts as a form of treason? I don’t want to downplay any illegal activity and it sounds like they may very well have done some things quite wrong–particularly related to providing disclosures to investors. That is serious stuff and if guilty I hope they receive the full measure of the law. But the Economist headline was right: Greedy until Proven Guilty. Greed is out. Frugalness and self-sacrifice when it comes to earnings is in. Part of this is because we love those who work hard, try to get to the top against insurmountable obstacles, but no sooner do they stand on the mountaintop alone and we start throwing stones, eagerly awaiting their fall. (I’ve blogged on this about Toyota long before they fell from the mountaintop.) Goldman’s problems with public opinion and reputation emerged well before the SEC investigation. They may go the way of Arthur Andersen who died not because of legal problems (which they won) but because they became so tainted in the public’s eyes that the stink attached to them infected anyone they did business with. It was the loss of customers that killed them. Goldman faces very much the same risk. If they don’t aggressively remove the stink, no one concerned about their reputation will want to get too close.

Stories are emerging now about BP’s reputation as it relates to the Deepwater Horizon event. (Full disclosure, BP is a client) Whether that is fair or not will be for the media and the public to decide. BP leased the drilling rig and is working exceptionally hard, as a member of the Joint Information Center for the response, to communicate aggressively, quickly and effectively. But, BP’s reputation, the reputation of the oil industry, the sentiment of people impacted by this event and the environmental damage will all factor into the discussion to come about the risks and benefits of deepwater drilling. Obama has announced his support for expansion. That support may be at risk if the outcry rises about this event. That’s why what those people involved in the response and the communication about the response are doing is so important. It’s also why it is important that the entire industry be involved in open, honest, rational debate about this event and its results. The tendency of the industry is to duck and hide and say, well, we produce oil and whether people like us or not they keep buying it. There are those in the industry who point to Exxon and say despite the reputation hit they took, they continue to be one of the most profitable, respected, investor-preferred companies around. No question that ExxonMobil is exceptionally well run. But there is no question that the reputation hit they took continues to cast a pall over the company and the industry. The cost to all of us as consumers of fuel products is much higher directly as a result of the careless attitude Exxon exhibited during the event and in the years following it. Higher because of regulation, because of lack of public support for anything perceived as favoring the industry, and because the industry continues to be a favored target (certainly in Washington State) for punitive taxes. All those add to energy costs which you and I pay. So I get angry with the industry communicators who say, see, it didn’t matter that Exxon’s reputation got hurt. Wrong.

I hope if you are an organization leader or a person charged with crisis management and communication responsibility, you will think about the link between reputation crises and politics. Because what you do to build or destroy trust will likely impact all of us. You have a heavy responsibility.